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How small business owners can defend an unfair dismissal claim in a summary dismissal scenario

If you are a small business employer (ie you and related entities employ fewer than 15 employees, including casuals and part-timers), you will be able to successfully defend an unfair dismissal claim if the dismissal is consistent with the Small Business Fair Dismissal Code. A recent decision of the Full Bench of the Fair Work Commission (Commission) has highlighted what you need to do to comply with the Code when you want to summarily dismiss (without notice) an employee for serious misconduct.

A previous full bench of (then) Fair Work Australia held that to summarily dismiss an employee consistent with the Code, a small business employer must hold a belief that the employee’s conduct was sufficiently serious to justify immediate dismissal. It must also have reasonable grounds on which to base the belief. This requires the employer to carry out a reasonable investigation into the matter, even if the employer is not actually correct in its belief.

employee’s company used valuable property of his employer for his own company’s benefit and to his employer’s detriment, without authorisation. The employer investigated the matter, including seeking explanations and relevant documents from the employee and others, and reviewing the relevant law. The employee was dishonest about the matter when confronted by his employer.

As a result of its investigation, the employer formed a belief that the employee’s conduct was sufficiently serious to justify immediate dismissal, and summarily dismissed the employee. The termination letter clearly set out the employer’s belief about the conduct of the employee and its conclusion that the conduct amounted to serious misconduct. The termination letter also explained how the employer had formed the belief.

The Full Bench of the Commission found that the letter was useful evidence about the state of mind of the employer at the time of the dismissal. The employer successfully relied on the termination letter to establish that it had reasonable grounds for holding its belief about the employee’s conduct. The Full Bench of the Commission found that the grounds were reasonable because the investigation conducted by the employer was reasonable. It also highlighted that such conflicts of interest and dishonesty generally justify summary dismissal.

Lessons for employers

Small business employers should make sure that when they intend to dismiss an employee for serious misconduct, they:

conduct a reasonable investigation, including gathering evidence, putting allegations to an employee and taking their response into account;

form a belief as to whether or not the employee’s conduct is sufficiently serious to justify immediate dismissal, preferably based on relevant legal principles; and

after giving the employee an opportunity to respond to the allegations of serious misconduct and taking into account any response, record all of these considerations in writing, preferably in the termination letter.